A comparative analysis of the different measures used o determine the size of the informal sector of the South African economy
| dc.contributor.author | Davids Shafeeqa | |
| dc.date.accessioned | 2025-08-07T12:56:01Z | |
| dc.date.available | 2025-08-07T12:56:01Z | |
| dc.date.issued | 2011 | |
| dc.description.abstract | Since the concept of informal sector was first introduced in a 1971 analysis of the Kenyan economy, there were debates about the appropriate definition of informal economic activity, as well as about the estimation of its size. I n recent years, there seems to be a universally accepted definition of informal economic activity, which refers to enterprises that are unregistered, including those that employ workers with inferior working conditions and weak employment relationships. However, there i s still no real consensus on the method to estimate the size of this sector, as well as which aspects of the informal economy should be measured (for instance, informal employment, or informal economic activity as proportion of GDP). In South Africa, the informal economy is expected to play a significant role mainly because informal employment is relatively high (as proportion of formal employment). The formal economy is characterised by a slow pace of employment creation and a high rate of unemployment. Yet, according to recent studies the country is an international outlier with regard to the size of informal employment as proportion of total non-agricultural employment. Some researchers believe that informal employment is under-estimated due to shortcomings of the specific method used by Statistics South Africa (which is the official method). Furthermore, there is a Jack of South African studies investigating the specific nature and reasons behind inform a l economic activity, as well as the contribution of the informal economy y to GDP. As informal economy is important to absorb the unemployed who are retrenched and those who are unable to find formal employment due to reasons like a skills mismatch. an economic recession, and there are important linkages between formal and informal economies, which cannot be ignored by policy makers. Hence, various researchers suggested that other approaches to measure the informal economy should be considered . This study provides a critical evaluation of the various methods to estimate the size of the informal economy and of the results of the empirical evidence applying these methods to both South Africa and other (developed and developing) countries. It was found that there is no indication that the informal economy has diminished as a country develops. In contrast, in general, in both developed and developing countries, the size of the informal economies showed an upward trend throughout the years. The results indicate that in the South African context, the informal economy does play a significant role in terms of job creation and contribution to the national product. However, the method used by Statistics South Africa seems to have under-captured informal employment. This has important pol icy implications and it is thus recommended that more research should be done with a specific focus on the estimation of the size of the informal economy as proportion of GDP. | |
| dc.identifier.uri | https://hdl.handle.net/10566/20659 | |
| dc.language.iso | en | |
| dc.publisher | University of the Western Cape | |
| dc.subject | Informal economy/sector | |
| dc.subject | informal employment | |
| dc.subject | labour market trends | |
| dc.title | A comparative analysis of the different measures used o determine the size of the informal sector of the South African economy | |
| dc.type | Thesis |